Pennsylvania Would Fund Colleges by Sniffing Out Medicaid Fraud

May 18 (Bloomberg) -- Pennsylvania legislators are pinning their effort to avert the steepest higher-education cuts in U.S. history on savings from reducing Medicaid waste and fraud. If the state can’t find enough, more than 160,000 needy residents may go without health care.

Republican Governor Tom Corbett had proposed halving funding for state universities and cutting primary education. Instead, the majority Republicans in the House of Representatives plan to divert $470 million from the Public Welfare Department, saying that rooting out cheating and errors will create savings.

U.S. states face 2012 shortfalls totaling $112 billion, the Washington-based Center on Budget and Policy Priorities said in March. To cope with Pennsylvania’s forecast $4.2 billion deficit, lawmakers are assuming savings their counterparts in other states aren’t and are putting higher education ahead of social services and health care.

“The House proposal is a step backward,” Sharon Ward, director of the Harrisburg-based Pennsylvania Budget and Policy Center, said in a telephone call. “Cutting hospitals to restore colleges and universities -- we think it’s a lose-lose approach.”

Republican Representative William Adolph of Springfield, head of the Appropriations Committee, said restoring aid to universities is important, because otherwise tuition would rise for about 270,000 students.

Economic Drivers

Lawmakers also say the universities drive jobs and tax revenue. Pennsylvania State University, for one, wrote paychecks for 44,000 and contributed $17 billion in direct and indirect economic activity in the state in 2008, according to a study by Pittsburgh-based Tripp Umbach & Associates, which the university hired.

No other state is considering budget proposals counting on Medicaid savings from waste and fraud in the next fiscal year, according to Jon Shure, director of state fiscal strategies for the budget and policy center, and data compiled by the National Conference of State Legislatures. California in fiscal 2011 incorporated a $26 million savings from antifraud efforts in its Medicaid program, according to the data.

“That is very unlikely to materialize in Pennsylvania or anywhere else,” said Shure, whose group focuses on issues that affect lower-income Americans. “What is more likely that there would be cuts to services people need. It’s hard to imagine waste at such a level that you would find savings.”

The Senate, also controlled by Republicans, will take up the budget bill after House passage. The Legislature must pass the spending plan before the fiscal years begins July 1. A Corbett spokesman, Kevin Harley, didn’t return a telephone call seeking comment.

Historic Cuts

If the governor’s plan were enacted, it would be the steepest one-time drop in college funding in U.S. history, according to Daniel Hurley, director of state relations and policy analysis at the Washington-based American Association of State Colleges & Universities.

The $27.3 billion House spending plan would mean only a 15 percent drop for 14 universities owned by the state. It would result in a 25 percent cut to four universities outside the system that receive aid.

To minimize university cuts, legislators plan to decrease funding for Medicaid, the joint federal-state health program for the poor, by 4 percent. They settled on the amount after the federal Center for Medicare and Medicaid Services audit of payments in the state last year found that 4 percent of applications had errors, Adolph said.

‘Stopping the Bleeding’

“I am quite comfortable we are not slashing and burning the welfare budget,” he said. “We are stopping the bleeding of the fastest-growing line item in the state budget.”

Groups foresee serious consequences. Hospitals would get $70 million less in state and federal payments for treating indigent patients, said Roger Baumgarten, spokesman for the Hospital & Healthsystem Association of Pennsylvania, a Harrisburg-based organization. In addition, as many as 164,300 residents could lose access to health care through Medicaid, Ward said. About 2.2 million Pennsylvanians receive assistance.

An initiative that gives child-care subsidies to low-income parents of 130,000 children and has a waiting list of 12,000 may be jeopardized, said Joan Benso, chief executive officer at Pennsylvania Partnerships for Children, an activist group in Harrisburg.

“Our economy is slowly recovering, but kids and families still need help,” she said in a telephone interview. “We are making cuts to programs that will have a negative impact on children.”

On the Street

The bill would eliminate $27 million from an area that supports the living needs of people with intellectual disabilities, a potentially “catastrophic” event that would force a “large number of group homes” to go out of business, said Ilene Shane, chief executive officer of advocacy group Disability Rights Network of Pennsylvania. About 15,500 people live in 6,000 group homes across the commonwealth.

Acting welfare Secretary Gary Alexander said during his Senate confirmation hearing May 11 that he was sure there would be savings by finding fraud. He didn’t know how much.

“I don’t know if it’s $400 million at this point,” he said. “It could be; it could be more; it could be a lot less.”

To contact the reporter on this story: Romy Varghese in Philadelphia at

To contact the editor responsible for this story: Mark Tannenbaum at